Americans are waiting longer to retire – but workers with less education retire sooner, especially if they are men.
Several studies indicate that the gap in retirement ages between workers with a college education and those with just a high school education is growing, but few have uncovered why, according Matthew Rutledge, a research economist at Boston College’s Center for Retirement Research.
In “What Explains the Widening Gap in Retirement Ages by Education,” his own analysis of census data, Rutledge found that between 2010 and 2016, men with a college education retired at an average age of 65.7, while men with only a high school education retired at an average age of 62.8. In the earliest period analyzed by Rutledge, from 1976 to 1979, the average college educated man retired at 64.6 years old, while the average high school educated man retired at age 64.1.
“The gains in the average retirement age since the 1990s have been driven almost solely by those with more education,” wrote Rutledge. “ Today, male college graduates retire three years later than high school graduates. While the story is more complicated for women because of the dramatic change in their labor force participation over the latter half of the 20th century, the overall message is similar: like men, the gap in average retirement ages by education has grown substantially.”
The numbers present a paradox: Since workers with less education on average receive lower pay, researchers like Rutledge might expect men without a college degree to work longer to shore up any shortfalls in their retirement savings.
However, workers with less education have left the workforce incrementally earlier over time. Rutledge attributes the growing gap to four demographic and financial trends: a growing inequality in longevity and overall health, changes in labor market conditions, Social Security policy changes and differences in marital status between college educated and non-college educated men.
According to Rutledge, health is always a key factor in the retirement date decision, but it’s the single most decisive factor in an earlier-than-planned retirement. Workers who experience a health crisis are more likely to retire early, and workers who are in poor health when planning for their retirement tend to retire earlier than they planned. Since education level positive correlates to health, meaning more education usually means better health, men without a college education are more likely to leave the workforce earlier than planned due to health issues.
Policy factors may be affecting retirement decisions; for example, the replacement of defined benefit plans with defined contribution plans like 401(k)s is a trend already associated with later retirement. More educated workers may have more access to 401(k) plans.
Rutledge associates a structural change in the American economy with the shift in retirement ages -- over the past 50 years, the country has transitioned from manufacturing-based to service-based employment. While the expansion of the labor force into less physically demanding jobs should enable more workers to postpone retirement, Rutledge notes that many service-sector employees still toil in poor working conditions involving heavy lifting, repetitive motion and long periods of sitting or standing. Less educated workers also have less control over their own schedules, leading to more difficulty taking time off.
Employees with lower levels of education may also experience more threatening behavior from coworkers or superiors while on the job, which might encourage an earlier job exit.